OCL India Limited Vs Commissioner of Central Excise (CESTAT Kolkata)
CESTAT Kolkata allowed the appeal filed by OCL India Limited and set aside the demand for central excise duty on sales commission paid to selling agents. The appellant manufactured and cleared refractory products under Chapters 68, 39 and 38 of the Central Excise Tariff Act, 1985. During April 2005 to March 2006, it paid sales commission to foreign agents for procuring export orders and to Indian selling agents for domestic sales.
A Show Cause Notice dated 19.04.2010 was issued under Section 11A of the Central Excise Act, 1944, invoking the extended limitation period and proposing recovery of central excise duty on the sales commission, along with interest and penalty under Section 11AC. By Order-in-Original dated 27.10.2017, duty of Rs.3,04,152/- was confirmed with interest and an equivalent penalty. The Commissioner (Appeals) upheld the order.
Before CESTAT, the appellant submitted that the buyers and sellers were unrelated, price was the sole consideration, and sales commission was neither part of the price paid or payable by buyers nor an amount payable by buyers to or on behalf of the appellant. It was submitted that the commission was borne by the appellant and no additional consideration flowed from the buyers. The appellant also contested the demand on limitation.
CESTAT identified the sole issue as whether the sales commission was includable in the assessable value. The Tribunal found that Revenue had produced no evidence showing that the commission paid by the appellant was recovered from buyers. The records instead showed that the commission was borne by the appellant against the sale price received from buyers. There was also no evidence that the appellant received any additional consideration towards the goods.
CESTAT therefore held that the demand on sales commission was not sustainable as the relevant amount was already included in the assessable value on which the appellant had correctly paid duty. The impugned demand was set aside, no penalty was imposable, and the appeal was allowed with consequential relief, if any.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order wherein the demand of central excise duty has been confirmed against them by invoking Section 4(3)(d) of the Central Excise Act, 1944.
2. The facts of the case are that the appellant is engaged in the manufacture and clearance of Refractory Products falling under Chapters 68, 39 and 38 of the Central Excise Tariff Act, 1985. During the period from April, 2005 to March, 2006, the appellant paid sales commission to Commission Agents like M/s. Dalton International Limited, Manchester, K, M/s. International Link Corporation, Iran; M/s. Jagadish Katarka, Iran, M/s. J.A. Iqbal, Pakistan, who are based in foreign countries and M/s. El. Graphites Pvt. Ltd., Nasik, for promoting export of Refractory Products. The services rendered by the selling and other agents included procuring of orders, etc., for export of Refractory Products to foreign countries.
2.1 The appellant had also engaged selling agents in India like M/s. S.K. Tulsyan Trading Co. Pvt. Ltd., Mumbai, M/s. Shree Krishna Trading Company, Tuticorin, M/s. Vishnu Lakshmi Traders, Jaipur for domestic sales.
3. For the said services rendered by the selling agents, the appellant paid sales commission.
4. A Show Cause Notice was issued to the appellant on 19.04.2010 under Section 11A of the Central Excise Act, 1944, by invoking the extended period of limitation, on the basis of audit conducted, to demand central excise duty on the sales commission paid by the appellant to their selling agents during the impugned period, along with interest thereon and also to impose penalty under Section 11AC of the Act.
4.1 The matter was adjudicated by way of Order-in-Original dated 27.10.2017 whereby the demand of central excise duty amounting to Rs.3,04,152/- was confirmed, along with interest; penalty equivalent to the amount of duty demanded was also imposed.
4.2 The said order was challenged before the Ld. Commissioner (Appeals), who, vide the impugned order, affirmed the said adjudication order.
4.3 Hence, the appellant is before us.
5. The Ld. Counsel appearing on behalf of the appellant submitted that it is not in dispute that the buyers and sellers are unrelated parties and that price is the sole consideration of sale; that sales commission is not part of the sale price paid / payable by the buyer to the seller. Therefore, it is submitted that the sales commission paid by the appellant cannot be treated as part of the transaction value. It is also submitted that ‘transaction value’ is the actual price paid or payable for the goods when sold and any amount the buyer is liable to pay to or on behalf of the assessee by reasons of or in connection with the sale. It is explained that the sales commission sought to be included in the transaction value is neither the ‘price paid or payable for the goods when sold’ nor ‘any amount the buyer is liable to pay to or on behalf of the assessee by reasons of or in connection with the sale’; that it is the expense of the appellant and there is no flow of any additional consideration/amount from the buyer to the appellant. The Counsel for the appellant therefore submits that in these circumstances, the amount of sales commission paid by the appellant cannot be said to be includable in the assessable value.
5.1 He also contested the impugned demand as being barred by limitation as, for the period 2005-06, the Show Cause Notice has been issued on 19.04.2010, on the basis of Audit of their Books.
6. On the other hand, the Ld. Authorized Representative of the Revenue supported the impugned order.
7. Heard the parties and considered their submissions.
8. The sole case of the Revenue pertains to whether the sales commission paid by the appellant is includable in the assessable value, or not.
9. Admittedly, the Revenue has not come up with evidence to show that the amount of sales commission paid by the appellant was recovered by the appellant from the buyer. In fact, as per the records available before us, the sales commission paid by the appellant is borne by the appellant against the sale price received by the appellant from the buyers.
9.1 There is also no evidence on record to show that the appellants have received any additional consideration towards the sale of the goods in question.
10. In these circumstances, we hold that the demand on account of sales commission paid by the appellant is not sustainable as the same is already included in the assessable value, on which the appellant has paid duty correctly.
11. Therefore, the impugned demand confirmed against the appellant is set aside. Consequently, no penalty is imposable on the appellant.
12. In the result, we set aside the impugned order and allow the appeal, with consequential relief, if any.
(Order pronounced in the open court on 05.08.2026)
